Service now! Time to wake up the sleeping giant - Bain & Company

4. Sales and operational improvement: how to win
Because service operations tend to generate high
margins, operational excellence still gets little management
attention in many service operations. As a
consequence, service performance is driven more
by the individual capabilities of the frontline technicians
rather than by the strengths of a well-defined
operating model. Successful players define repeatable
service models that can be scaled, measured
and managed globally. Such a model clearly defines
what will be sold and delivered – and how. By getting
it right, a service organization can unleash enormous
potential to delight customers and continuously
gain bottom-line benefits through efficiency
improvements. Companies with repeatable service
models do four things well: create service packages
with a clear value proposition targeted at attractive
customer segments, achieve sales and pricing excellence,
define efficient delivery processes in a welldesigned
service network and optimize the service
supply chain.
Service is typically a high-margin business with
lower-volume transactions. But industrial goods manufacturers
are used to thinking in terms of largevolume
sales. So they may easily overlook smaller
opportunities and not manage their service sales to
the full potential. Service priorities and price resilience
often suffer, particularly where service sales
are combined with new product sales, because under
these circumstances service often gets little attention
and becomes one of the first areas to be sacrificed in
price negotiations.
Our work shows that companies can pull a set of
practical levers to enhance service sales performance:
Full market coverage
OEMs should scale their salesforce relative to the full
market potential of their installed base rather than to
historical headcount levels by leveraging a deep understanding
of their installed base. Where potential
is too low for an independent presence, the development
of an agent network can be a viable alternative.
Service now! Time to wake up the sleeping giant
What service champions do
• Optimize spare parts pricing based on segmentation,
according to part exclusivity, criticality and price sensitivity
• Establish a database of their installed base, including
technical characteristics, and monitor equipment usage
as a platform for proactive retrofit and upgrade offers
• Launch sales campaigns for specific spare parts with
clear customer value
• Run a last call initiative for parts before they cease
keeping them in stock
• Use home-based technicians to maximize market coverage
and proximity to the customer
Spotlight: boosting business through sales management and pricing
Proactive sales management
Change the sales model from a reactive taking of orders
to a proactive development of the market. This
includes launching new services that address a clearly
identified market need, offering more services
to existing customers where share of wallet is low,
submitting proactive modernization offers based on
usage data or targeting lost customers with dedicated
recovery campaigns.
Smart pricing and discounting
OEMs can shift away from a cost-plus approach
to pricing and instead move to differentiated pricing
models based on competition, criticality and
customer sensitivity. For example, customers may
be sensitive to the prices on high-volume commodity
parts, but less sensitive to price on critical parts and
services. The next step is to avoid margin leakage
by establishing rules or granting discounts to customers
and enforcing them with discipline.
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